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Upcoming Deadline for Annual Reporting and Payment of Patient-Centered Outcomes Research Institute Fee

The deadline for applicable self-insured health plans (including calendar year plans) and issuers of specified health insurance policies to report and remit the Patient-Centered Outcomes Research Institute fee (“PCORI Fee”) due under the Affordable Care Act (the “ACA”) with respect to the 2013 plan or policy year is July 31, 2014. The PCORI Fee is assessed under the ACA in order to fund the Patient-Centered Outcomes Research Institute. This fee applies to plan or policy years ending on or after October 1, 2012 and before October 1, 2019. Plans and issuers should report and remit the PCORI Fee, which is based on a flat dollar amount multiplied by the average number of lives covered under the plan or policy for the applicable plan or policy year, via a second quarter IRS Form 720. Additional information regarding calculation, reporting, and payment of the PCORI Fee can be found on the IRS’s… Continue Reading

The PBGC Issues Moratorium on Enforcement of Section 4062(e) Cases

The Pension Benefit Guaranty Corporation (the “PBGC”) recently announced a moratorium on enforcement of ERISA Section 4062(e) cases. Through the end of 2014, the PBGC will cease enforcement efforts on both open and new cases. Section 4062(e) applies to employers who cease operations at a facility and, as a result of that cessation, more than 20 percent of the employees participating in the employer’s pension plan are separated from employment. In that case, the employer must notify the PBGC, which imposes penalties if the notification does not occur. The PBGC also may require the employer to provide increased financial security for its pension plan in the form of a security bond, escrow amount, or additional contributions. The PBGC advised employers to continue reporting new Section 4062(e) events, but noted that it will not take any action on such events during the moratorium.  The PBGC announcement is available here.

IRS Issues Regulations on Longevity Annuity Contracts

The IRS released final regulations relating to the use of “qualifying longevity annuity contracts” (“QLAC”).  A QLAC is a special type of annuity contract under a tax-qualified defined contribution plan, such as a 401(k) plan, which provides a lifetime income stream starting no later than age 85.  Amounts held in a QLAC are exempt from the required minimum distribution rules of the Internal Revenue Code.  Pursuant to the final regulations, only up to the lesser of $125,000 or 25% of the participant’s account balance may be invested in a QLAC.  Additionally, a QLAC can have no cash surrender value. The final regulations can be found here.

Most Same-Sex Registered Domestic Partnerships in Washington State Deemed Marriages as of June 30, 2014

Same-sex couples under the age of 62, who had not previously taken action to convert their Washington state registered domestic partnership to a marriage, are deemed married as of June 30, 2014.  However, for purposes of Washington state law, the legal effective date of the deemed marriage will be the date the couple originally entered into their registered domestic partnership.  Employers and plan sponsors should consult with benefits counsel to properly implement this change of an employee’s marital status for income tax withholding and other employee benefit plan purposes, for example, to determine whether beneficiary designations of someone other than the employee’s former domestic partner, now spouse, remain valid. A copy of a notice from the Washington Secretary of State’s office discussing this change can be found here.  A copy of the Washington state law authorizing same-sex marriages and the conversion of domestic partnerships to marriages can be found here.

Supreme Court Strikes Down Contraceptive Mandate for Certain Closely-Held Corporations

The U.S. Supreme Court’s decision in Burwell v. Hobby Lobby Stores, Inc. was announced on June 30.  The Court held that the regulations issued by the U.S. Department of Health and Human Services (“HHS”) under the Affordable Care Act (the “Act”), which require the group health plans of applicable large employers (generally 50 or more full-time employees) to provide their female employees with no-cost access to contraceptives, violated the federal Religious Freedom Restoration Act (“RFRA”) as applied to the plans of closely-held for-profit corporations with sincerely held religious beliefs relating to contraceptives. Background As part of the Act’s requirement that group health plans of applicable large employers must provide “preventive care and screenings” for women without “any cost sharing requirements,” HHS issued regulations requiring full coverage of the 20 contraceptive methods approved by the U.S. Food and Drug Administration.  The plaintiffs in Hobby Lobby objected to four of the required… Continue Reading

Agencies Issue Final Regulations Confirming One-Month Orientation Period Under the Affordable Care Act

The U.S. Departments of Health and Human Services, Labor, and the Treasury (together, the “Agencies”) issued final regulations under the Affordable Care Act (the “Act”), which clarify that the maximum allowed length of an employment-based orientation period that may precede the 90-day waiting period for coverage to become effective under a group health plan is one month. The regulations explain how the one-month maximum will be applied based on various employment start date scenarios. The preamble to the regulations also clarifies the interplay between the 90-day waiting period requirement and the employer shared-responsibility provisions of the Act (the so-called “play-or-pay rules”), confirming that compliance with the 90-day waiting period (and orientation period) requirements is not determinative of compliance with the play-or-pay rules. The play-or-pay rules penalize employers that fail to provide affordable minimum value coverage to certain newly-hired full-time employees by the first day of the fourth full calendar month of… Continue Reading

No Presumption of Prudence in Stock Drop Cases, but ESOP Fiduciaries Provided Some Comfort

The U.S. Supreme Court held that ESOP fiduciaries are not entitled to a special “presumption of prudence” when investing plan assets in employer stock.  The Court stated, however, that it is generally prudent to assume that a major stock market provides the best estimate of a stock’s value, in the absence of special circumstances.  In addition, the Court stated that, to state a claim for breach of the duty of prudence on the basis of inside information, a plaintiff must plausibly allege an alternative action that the defendant could have taken that (1) would have been consistent with securities laws, and (2) a prudent fiduciary in the same circumstances would not have viewed as more likely to harm the fund than help it. Fifth Third Bancorp v. Dudenhoeffer, 573 U.S. ____ (2014). The decision can be found here.

Supreme Court Issues Decision on the Affordable Care Act’s Contraceptive Mandate

The U.S. Supreme Court’s 5-4 decision in Burwell v. Hobby Lobby Stores, Inc. was announced yesterday. The Court held that the Affordable Care Act (the “Act”), which requires employers to provide their female employees with no-cost access to contraceptives, violated the Religious Freedom Restoration Act as applied to certain employer-provided health plans. Importantly, the Court limited its ruling to closely-held corporations (under IRS rules, a corporation that is controlled by five or fewer individuals) with sincerely held religious beliefs relating to contraceptives.

Fifth Circuit Holds Any Claim that Exhausts Underlying Insurance Can Trigger Excess Coverage

In a win for policyholders relying on multiple coverage layers, the Fifth Circuit held on June 23, 2014 that an excess liability insurance policy could be triggered by exhaustion of a “retained limit”—equal to the limits of underlying insurance—even if the amounts paid to meet the “retained limit” were not covered by the excess policy.  Indemnity Insurance Co. of N. Am., et. al. v. W & T Offshore Inc., — F.3d –, No. 13-20512 (5th Cir. June 23, 2014). In W&T, the insured had submitted over $150 million in property damage and operators’ extra expense claims to its primary “energy” carrier resulting from Hurricane Ike.  W&T’s umbrella carriers did not insure property damage or operators’ extra expense incurred by W&T itself.  The umbrella carriers sought a declaratory judgment that the “retained limit,” necessary to trigger the umbrella coverage, had not been met.  Instead, the umbrella carriers argued, only payments for… Continue Reading

Conflict Remains among Federal Appellate Circuits Regarding Recovery of Overpayments under ERISA Section 502(a)(3)

The U.S. Supreme Court recently declined to review a decision by the U.S. Court of Appeals for the Second Circuit in Thurber v. Aetna Life Insurance Co., 712 F.3d 654 (2d Cir. 2013), which held that a plan fiduciary was entitled under Section 502(a)(3) of the Employee Retirement Income Security Act of 1974 (“ERISA”) to recover overpayments made to a participant from a short term disability (“STD”) plan subject to ERISA, even though the participant had already spent the overpayments she received from the plan.  The overpayments in Thurber arose when the participant received “other income,” which the STD plan document provided could reduce the amount payable from the plan.  The Second Circuit specifically rejected the reasoning of the Ninth Circuit in Bilyeu v. Morgan Stanley Long Term Disability Plan, 683 F.3d 1083, 1093–95 (9th Cir. 2012), which held that overpayments from a disability plan could not be recovered under… Continue Reading

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